I would definitely use Apple Disk Utility. Besides being the most reliable method, it allows you to easily partition the drive into multiple volumes which I would expect you would want to do with a TB drive.
I just ordered TWO of the DriveStation 1TB Combo drives with USB and Firewire 400 from PcConnection ($89.95 after mail in rebate + FREE shipping!) I plan to format them in Mac OS Extended (Journaled) format. I will create partitions for both Time Machine drives and full backups for my network Macs using SuperDuper.
Only thing you need to decide is the Partition Map Scheme based on the CPU you have.
PowerPC uses Apple Partition Map
Intel Mac uses GUID Partition Map
This is crucial if you want to create a bootable backup of your system on the DriveStation.
As I mentionedf above... I use both Time Machine via my LAN and a shareware program called SuperDuper! to handle full bootable copies of our machines.
SuperDuper is a great program for making a bootable clone of your system drive and it provides a ton of archiving options along with a full featured scheduled backup menu etc.
They offer a free trial so you can try before you buy.
As far as the data currently loaded on the drive... I would just copy that stuff off onto your system drive or another external BEFORE you reformat the DriveStation.
Hope this helps! :)
There apps on it and you can transfer those to another hard drive (your computer) so that you do not lose them during the format... Or you can just download those files from the "CD Image" in the downloads section for this unit.
I would recommend just formatting it using Disk Utility